With the rise of bitcoin, dogcoin and other cryptocurrencies, the Internal Revenue Service (IRS) has issued a warning to cryptocurrency investors who have not paid their taxes in full.
The IRS, by means of determining taxpayers’ cryptocurrency income, has done two other major things to do so.
In April, a federal judge in Boston granted IRS subpoenas to Circle Payments and its affiliate Poloniex to turn over customer records to the IRS.
In early May, a federal judge in San Francisco approved another IRS subpoena for the Kraken cryptocurrency exchange to turn over customer records.
Both companies must provide the IRS with IRS records of customers with annual transactions of more than $20,000 since 2016.
And the above subpoenas are not the first of their kind; in 2016, the IRS sent messages to approximately 13,000 Coinbase users and urged them to verify payment of any cryptocurrency proceeds.
The IRS also looked for “default” customers on Coinbase and found that 750 people had sold $100 million in cryptocurrency.
The IRS sent warning letters to taxpayers who allegedly received income from cryptocurrencies without filing tax returns. To wit.
(We have) information that you have or have had one or more accounts that hold cryptocurrencies and that you may not be in compliance with U.S. tax reporting requirements for transactions involving cryptocurrencies and non-crypto virtual currencies.
This warning comes from passive taxation, where taxpayers are encouraged to amend their tax returns. Otherwise, failure to pay taxes on cryptocurrencies could result in stiff penalties or even jail time. Such a warning would prompt reasonable people to amend their tax returns as soon as possible. If there is evidence that the person failed to file a tax return, federal charges could be brought against them.
Having said all that, who is the IRS? A previous Wall Street Journal article mentioned.
“In this world, only death and taxes are inescapable.” As long as you are suspected of tax evasion, the IRS will chase you to the end of the world.
The IRS is such a frightening existence.
For the average person, if they accidentally make a mistake when filing a return, forget to attach important documents, or really don’t have the money to pay the taxes they owe, the IRS may send a letter to correct the mistake or audit the individual who made a relatively serious mistake, but it will not send the person to jail.
However, if a person chooses to avoid filing a tax return or intentionally fills out a wrong return or commits tax fraud, the person could face jail time if the IRS determines that tax evasion is suspected.
In this regard, “the prince is as guilty as the common man”, whether it is Michael Jackson, the superstar, or Al Capone, the gangster known as the “Mayor of the Underground”, is no exception.
In 2014, Michael Jackson left an estate of about $1.1 billion, but his estate owners reported only $7 million. As a result, the IRS said the Jackson Estate Management Committee should pay $702 million, including $505 million in taxes and $197 million in penalties.
Al Capone, a mobster in the 1920s and 1930s, whom the police and FBI could not get a hold of, was proven by the IRS to have millions of dollars of income that was never taxed. As a result, Al Capone was found guilty and sentenced to 11 years in prison and paid a $50,000 fine (equivalent to about $800,000 today).
According to media reports, in order to issue subpoenas to Kraken and Circle, the IRS provided the results of a tax investigation of Coinbase’s customers. Court documents show that the IRS has received over 1,000 amended tax returns and collected $13 million in taxes from cryptocurrency investors. In addition, $12 million in taxes have been collected from other related reports, and audits are ongoing.